Energy security versus myopia: India’s LPG scarcity highlights the need for robust central planning

The crippling shortage of this item of mass consumption that has proven to be the Achilles heel of our energy security calculus partly owes its origin to well-intentioned policy efforts to shift households from kerosene to liquefied petroleum gas (LPG), a cleaner fuel.

While only half of India’s population had access to LPG in 2010, its coverage is nearly complete today. Our import dependency in meeting this demand, which now stands at around 60%, has risen not just because Indian production has not kept up, but also on account of an inherent technical limitation.

While a refinery can convert up to about 14% of its input crude into kerosene, its LPG output typically does not exceed 4%. In one instance during the first decade of this century, the government nudged a private refiner to forsake churning out export-oriented aviation turbine fuel (or jet kerosene) for the supply of less remunerative regular kerosene in the Indian market to avert disruptions and price shocks.

While this policy approach has been in scant evidence, we face the larger issue of widening supply gaps left by commercial and strategic interests. How we address them matters in the context of global energy volatility.

Over the past decade, India’s strategic initiatives for energy security have largely focused on raw-material sufficiency. The government created special storage facilities to hold reserves of crude oil, though not petroleum products. After the disruption caused by the Iran war’s outbreak, it asked refiners to maximize LPG output. This ramp-up, however, will not suffice to plug India’s shortfall. Nor do refiners have an incentive to set up special capacity just for emergency supplies.

No doubt, diversifying procurement away from Gulf suppliers is a good idea even if it proves to be more expensive. This is being done, but needs to be strengthened through long-term agreements with institutional oversight of such supplies. Indeed, the whole process needs to be guided by a robust policy framework designed to manage our energy transition.

A key aim is to depend less on imports, for which renewables and local sourcing must both expand faster. Optimizing this is a complex exercise that straddles central and state departments in pursuit of targets. Gas usage efficiency, meanwhile, requires us to hasten the rollout of pipelines across the country.

In the wake of the current crisis, the Centre has prioritized the supply of piped gas to household consumers. However, this network does not have enough connections at this point to curtail the rush for LPG cylinders. Getting it right requires an optimal national design.

The current crisis also highlights how we must invigorate oil and gas exploration efforts within the country. After all, oil accounts for 25-30% of our primary energy mix and almost 90% of it is imported; natural gas makes up around 6.5% of that mix, with about half our requirement met through imports.

The recent turn of events in West Asia heralds an era of geo-economics in which the role of the state is ascendant. This is amply clear when it comes to energy in general and hydrocarbons in particular. The key to this sector’s governance lies in better planning.